New Delhi, March 9 -- Emerging-market debt has become the star of the fixed-income world over the past year as market fundamentals improved and investors diversified away from the U.S. Whether that bull run progresses in the weeks and months ahead will be determined by the war in Iran and resulting energy price spikes.

Since the U.S. and Israel attacked Iran on Feb. 28, government bond yields around the world have risen on worries that a prolonged period of higher oil and gas prices will heat up inflation. Increased inflation could trigger a run up in interest rates, which would in turn boost bond yields. Rising yields mean falling prices for bond investors.

Emerging-markets bond spreads-the distance between their yields and U.S. Treasu...